Ron Paul: Government paper currencies are a disaster

MrsCK

Posts : 1337Join date : 2011-07-12Location : North pole

Ron Paul: Government paper currencies are a disaster

Ron Paul, Paul.house.gov, 14/05/2012

Last week I held a congressional hearing, to listen to different proposals for the improvement or resolution of the U.S. Federal Reserve. The purpose of this hearing was to provide a vigorous and ongoing debate regarding the issues to stir up the Fed, which will hopefully lead to concrete steps to get to the Fed's control.

First of all, it is important to understand what the Federal Reserve System is actually.Some argue that these are a secret cabal of elite bankers, while others claim it is a part of the federal government. In reality, it's a little of both. The Federal Reserve System is the fusion of exuberant state with the major banks to generate profits at the expense of taxpayers.

With the Fed's bailout of the banks that were distributed during the financial crisis, we rescued poorly managed companies, which were supposed to go under. Thus they a market-distorting advantage which, in the United States should ever get any business.

The latest news about the plight of JP Morgan underline this point. JP Morgan received bailout funds in the amount of USD 25 billion and recently announced a further loss of $ 2 billion. When a company turns out to be a bottomless pit, full of "mistakes, carelessness and bad judgment," even as the Fed could then assume that USD 25 billion change in free cash anything in it or have somebody a lesson about fiscal discipline would be?

Nonetheless, the Fed had decided to bring forward the intentional destruction of capital of a company's insolvency. It is clear that changes must be made here.

At the hearing, the various approaches to the Fed-reform were discussed. One of these reform proposals was to escape the Fed's mandate to create full employment, so that the U.S. central bank is able to fully concentrate on price stability.

Another reform proposal aimed to change the composition of the Fed's Open Market Committee. And there was also a proposal, where the direct nationalization of the Fed and its functions were required. But if that's what the Fed does now, bad and inflated, it would be even much worse, would you allow the U.S. Treasury, the discretion to print money, what could possible lead to hyper inflation in the style of the Weimar Republic.

At the hearing, the problems and advantages of the gold standard were discussed. The era of the classical gold standard was undoubtedly one of the most successful periods in the history of mankind. In the 19th Century, the West made over several decades, tremendous progress.

The gold standard was still in the hands of the government. The temptation to suspend the convertibility of gold showed at the beginning of World War II its ugly head. After gold bond is broken and the fiscal self-restraint was thrown overboard, it would have needed to resolve this problem of massive fiscal austerity. Instead, the West decided to prefer a semi-gold standard, which does not even lasted a decade before the policy began of easy money that led to the Great Depression.

While a return to the gold standard of safety would be significantly better than the current fiat money system will continue to maintain, we should, as long as the government has the power to break away from the gold standard, end up making the same mistakes again and again.

The only possible solution is that the government permanently stay out of the money business, and the way to do this is through the competition of currencies: currencies that circulate in parallel, without the government giving priority to these currencies have any special rights or privileges.

Due to its inflationary nature of fiat money standard yet each time is broken down in history - and our current fiat money standard will be there also is no exception.

It is crucial that the American people about the dangers posed by the Fed, and the importance of restoring sound money will be informed. These principles must now be created so that the American people are prepared for the day when the miracle happens and the Fed itself dissolves into thin air.